The world economy is experiencing the worst recession in the post-war period and governments need to respond vigorously to limit the social and economic costs of the resulting jobs crisis. A first priority is to assure that income support for job losers and other workers who need it is adequate and accessible. Temporary extensions of unemployment benefit duration or the coverage of non-standard workers may be desirable in some countries, provided incentives to find a new job are not undercut, as may be judicious expansions of in-work benefits or last-resort social assistance. A second priority is to scale up effective active labour market policies so as to provide increased numbers of jobseekers with the re-employment assistance they require and minimise the build-up of long-term joblessness. Core job-search assistance should be maintained through the downturn. However, greater emphasis on training, hiring subsidies and public-sector job creation (and other forms of subsidised work experience) may be required to shore-up activation regimes and ensure that more disadvantaged jobseekers do not disconnect from the labour market. It is also important to maintain effective labour supply and thus to resist the temptation to open pathways to early retirement and disability benefits. This proved to be a mistake in the past that was difficult to reverse and should not be repeated. The initial responses of OECD governments to the crisis appear to be largely consistent with these principles, but it is too early to evaluate their ultimate effectiveness in helping workers weather the storm. There is also a question mark over the scale of the expansion of active labour market policies to date in the face of the steep hikes in unemployment.

The world economy is experiencing the worst recession in the post-war period and governments need to respond vigorously to limit the social and economic costs of the resulting jobs crisis. A first priority is to assure that income support for job losers and other workers who need it is adequate and accessible. Temporary extensions of unemployment benefit duration or the coverage of non-standard workers may be desirable in some countries, provided incentives to find a new job are not undercut, as may be judicious expansions of in-work benefits or last-resort social assistance. A second priority is to scale up effective active labour market policies so as to provide increased numbers of jobseekers with the re-employment assistance they require and minimise the build-up of long-term joblessness. Core job-search assistance should be maintained through the downturn. However, greater emphasis on training, hiring subsidies and public-sector job creation (and other forms of subsidised work experience) may be required to shore-up activation regimes and ensure that more disadvantaged jobseekers do not disconnect from the labour market. It is also important to maintain effective labour supply and thus to resist the temptation to open pathways to early retirement and disability benefits. This proved to be a mistake in the past that was difficult to reverse and should not be repeated. The initial responses of OECD governments to the crisis appear to be largely consistent with these principles, but it is too early to evaluate their ultimate effectiveness in helping workers weather the storm. There is also a question mark over the scale of the expansion of active labour market policies to date in the face of the steep hikes in unemployment.

In all OECD countries, many new firms are created every year. At the same time, many existing firms expand, while others contract or even shut down. In the process, many jobs are created and workers are hired; even as many positions are suppressed and workers separate from their employers. The chapter presents stylised facts on gross job flows (i.e. job creation and destruction by firms) and gross worker flows (i.e. hirings and separations) drawing from internationally harmonised data. A wide range of empirical questions are investigated, as a prerequisite for assessing the role of policies in shaping job and worker flows. How large is the reallocation of jobs and workers? Which are the firms that create and destroy the most jobs? In which industries are hiring and dismissal rates largest? Who changes jobs most often? Are labour resources reallocated from the least to the most efficient firms? To address these questions, the chapter goes beyond aggregate data on job and worker flows by analysing industry-level and micro-data. Moreover, by stressing cross-country differences in labour flow patterns, the chapter underlines the potential role for country-specific policies and institutions.

Employment reduces considerably the poverty risk, but does not solve all problems. On average in the OECD area, 7% of individuals living in households with at least one worker are poor. And while in-work poverty is often related to insufficient work participation, resulting from very short part-time work or very short employment spells over the year, there are other important factors at work. In particular, poverty rates are higher for families with children. Thus, fighting in-work poverty requires implementing targeted policy responses. In this respect, social transfers play a key role, precisely because they can be targeted towards the most vulnerable households: on average in the OECD area, they reduce by almost half the rate of in-work poverty. Among these transfers, in-work benefit schemes can be particularly effective, if they are well conceived and combined with a binding minimum wage set – by law or collective agreements – to a moderate level. Conversely, since the risk of in-work poverty is much less related to hourly wage rates than it is with working time, employment duration or household composition, the minimum wage cannot constitute the main element of an effective strategy to alleviate in-work poverty.

This chapter presents new evidence on the role of personal and work-related factors for the entry to disability benefits and on policy developments in the area of sickness and disability across OECD countries. Disability benefit recipiency rates have increased most rapidly for women, young adults and individuals with mental health problems. However, the longitudinal analysis for individuals in four countries suggests that the probability to enter a disability benefit following an adverse health shock is only marginally higher for women and young adults than for other groups. Marked cross-country differences in the estimated results underlie to the importance of taking a closer look at how national disability policies differ. Indeed, new OECD indicators of disability policy reveal a wide diversity in both the generosity aspect and the employment integration component of disability policy. At the same time, most countries have tightened access to benefits in the last decade while improving employment integration. This is a promising development because the chapter’s analysis reveals that a more generous disability policy is associated with higher numbers of beneficiaries while more comprehensive employment and rehabilitation programmes are associated with lower recipiency rates.